U.S. Midnight Regulation Rush Is On! (Update)

November 10, 2008 (InfoPowa News) — CNet News published a guest column at the end of October 2008 that is of considerable interest to the online gambling industry. Authored by Republican economist and elder statesman Dick Armey of the FreedomWorks advocacy group, it presents a chilling picture of government overreach and the consequences to Net Neutrality.

In the article, titled "The Midnight Regulation Rush is On!", Armey alerts readers to the actions of U.S. Treasury officials in "quietly pushing through new rules that potentially will have devastating consequences for privacy and e-commerce.

"It's an understatement to say the Internet has done more to shape society over the last 10 years than any other technological innovation, transforming communications, business, and entertainment. The benefits generated by the technological revolution easily parallel those of the earlier industrial revolution. What's important is that this explosion in growth occurred in an era relatively free of government interference. Unfortunately, that may not remain the case," Armey writes, cautioning that the Treasury Department should be cautious in its Internet gambling rules.

Setting the scene, he goes on to opine that regulatory incursions onto the Internet are becoming more frequent, threatening the open dynamic that has generated so much for consumers.

"Without vigilance, we face the prospect of turning the Internet into something akin to an electronic version of the Post Office rather than the engine of growth it has become," he says.

"This can be seen in Congress' attempt to eliminate unlawful Internet gambling. Not only does the Unlawful Internet Gambling Enforcement Act of 2006 raise serious questions about privacy, but its vague definitions and poorly defined goals force banks and payment centers into a tight position.

"[The financial institutions] are now required to serve as an arm of the government, monitoring private Internet transactions, and blocking those that are 'illegal'," Armey writes.

"The problem is that the legislation never defined 'unlawful Internet gambling,' leaving banks and payment centers to sort out that thorny issue for themselves. This generates a great deal of confusion, leaving consumers and Internet users facing the real prospect of perfectly legal activities being blocked simply due to uncertainty and caution on the part of banks and payment centers. For those processing these transactions, the ambiguity is compounded by compliance costs and the paperwork burden."

Despite these worrying concerns surrounding the legislation, the Treasury Department is drafting a final rule it hopes to release in November to put the program in motion, Armey informs. This was confirmed last week by the news that Treasury officials had submitted the UIGEA regulations to the government's Office of Management and Budget for a 60-day review prior to implementation.

But some in Congress are well aware of the burdens and complexities associated with this vague rule, he says, pointing to the House Financial Services Committee legislation introduced by Democrat Rep. Barney Frank that offers a simple solution.

Armey feels that Franks's Payments System Protection Act makes clear that the law can be enforced against sports betting, which the courts already have defined as illegal. But it also requires regulators to define exactly what "unlawful Internet gambling" is prior to issuing broader regulations. This would substantially reduce the uncertainty and compliance costs for banks and payment centers. The Senate recently followed suit with its own attempt to clarify the ambiguities in the 2006 Act.

But Armey sounds a wider warning: "Beyond correcting the economic burdens of the law, however, Americans ought to be concerned about the larger questions of the law's impact on privacy and Internet freedom for the future.

"Once the federal government begins implementing guidelines for various types of online [financial] transactions, what is to prevent it from becoming more involved in every activity on the Internet?" he asks.

"The Founding Fathers took great care constructing a government that would protect our endowed rights and liberties, not restrict and monitor them. Americans don't want the government monitoring their private transactions, online or offline," he asserts.

Armey goes on to illustrate how the Internet has proved to be a powerful and valuable force in the U.S. economy.

"Annual e-commerce retail sales in the United States reached $107 billion in 2006, a 22 percent jump over the previous year. Restrictive government mandates would only restrain such growth, not encourage it. Each new mandate also brings further government encroachment upon the rights and liberties guaranteed by the Constitution. It is precisely because it developed relatively free from government oversight that the Internet has become such a dynamic part of our economy," Armey argues.

He ends with a caution for government officials: "Congress has acknowledged the potential downside of its foray onto the Internet with the 2006 Unlawful Internet Gambling Enforcement Act, and is working to correct its overreach. The Treasury Department should follow this lead, and not rush forward with sweeping government mandates that threaten the future growth and innovation on the Internet."

Armey is respected not only as an economist, but as a politician, too. He was GOP house majority leader between 1995 and 2003 and one of the architects of the "Republican Revolution" of the last decade that saw the Republican Party achieve majorities in both houses of Congress for the first time in 40 years.